Section 22: Credit for foreign tax on overlap profit if credit for that tax already allowed
86.This section is the first of a group of three sections which ensure that the DTR rules work consistently with the rules about overlap profits in Chapter 15 of Part 2 of ITTOIA. It is based on section 804(1) to (4) and (8) of ICTA.
87.When a person starts trading, it can happen that the same amount of trading income is subject to income tax in more than one tax year. In such cases, this section gives credit relief twice in respect of the income which is subject to income tax twice.
88.It is relevant that, when section 804(2) of ICTA was enacted, “by virtue of this section” could only mean “by virtue of subsection (1)”. Subsection (3) reflects the view that “by virtue of this section” in section 804(2) retains that meaning, notwithstanding the insertion in 1994 of what is now section 804(5B)(b).
89.Notwithstanding section 277(1) of TCGA, section 804 of ICTA is specific to income tax. The three sections which are based on it therefore have no application to capital gains tax.